VAT—European legal principles
Produced in partnership with Etienne Wong of Old Square Tax Chambers
VAT—European legal principles

The following Tax guidance note Produced in partnership with Etienne Wong of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • VAT—European legal principles
  • Fiscal neutrality
  • Fiscal neutrality—Member State discretion
  • Proportionality
  • Legal certainty and the protection of legitimate expectations
  • Equivalence
  • Effectiveness
  • Establishing breach
  • Challenging a breach—the European Commission
  • Challenging a breach—direct effect
  • more

Brexit: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. For further guidance, see Practice Note: Brexit—UK tax consequences.

VAT is a European tax. Council Directive 2006/112/EC (the VAT Directive) lays down the infrastructure for a common VAT system, which each Member State is required to implement in its home territory by means of domestic legislation.

A Member State’s responsibility extends beyond the correct implementation of the VAT Directive; it also has to ensure full application of the common VAT system even after adoption of the relevant domestic legislation.

Both the implementation and application of domestic VAT law are subject to a number of EU legal principles. Some of these are an inherent part of the common VAT system, while others are set out in treaties, such as:

  1. the principle of subsidiarity and proportionality

  2. the principle of equality of citizens, and

  3. the principle of non-discrimination on grounds of nationality

This Practice Note is about some of EU legal principles that regularly arise in a VAT context. These are:

  1. the principle of fiscal neutrality

  2. the principle of proportionality

  3. the principles of legal certainty and the protection of legitimate expectations

  4. the principle of equivalence, and